Expansion to Germany

As part of the EU, the German market is generally more heavily regulated than the Swiss market. In Germany – as in the entire EU area – the rules imposed by the EU must be considered. However, what seems cumbersome at first also opens doors: due to the strict German regulation, expansion to other EU countries with less strict regulation is an easier step and oftentimes, the entire EU market can be served from Germany.  

The most important issues that affect (almost) every company are data protection, consumer protection and competition regulations. In addition, there are industry-specific regulations, e.g., in the finance and insurance industry or concerning medical devices. You can find more details in our guide “Doing business in Germany“.  

Intellectual property is protected in Germany very much in a similar way to Switzerland. The protection for trademarks and patents should be extended to the German region when expanding. In this way, the intellectual property can also be better exploited commercially, for example through licensing.   

It should be noted that trademarks and patents are registered rights – rights registered in Switzerland are only protected in Switzerland. For protection on the German or European market, they must therefore also be registered in the respective German or European register. In Germany, the German Patent and Trademark Office (DPMA) is responsible for registering trademarks and patents.  

In contrast, copyrighted works are also protected in Germany without any special application or registration. Copyright protection arises automatically with the creation of the work.   

Technical inventions are most effectively protected by a patent application. This offers the broadest protection but is lengthy and requires the expert advice of a patent attorney. In addition, there is also the possibility of protection as a utility model, which is faster and cheaper than the patent application, but the protection is also less comprehensive. 

In the B2B sector in Germany, caution  should be exercised already when including general terms and conditions. The general terms and conditions of contractual partners automatically take precedence over the customer’s own terms and conditions if they are sent together with an offer, provided that the customer does not actively object to them. Furthermore, German courts often base their interpretation of GTCs in the B2B area on the consumer-friendly interpretation of GTCs from the B2C area. Accordingly, in the B2B area, it makes sense to declare Swiss law applicable, as it is less strict in terms and conditions law and allows for smoother trading. 

In the B2C sector with German consumers, it should be noted that the less consumer-friendly Swiss law cannot simply be agreed on – the choice-of-law clause must indicate that the more favorable domestic law for the consumer also applies. General terms and conditions clauses are also subject to extensive review by German courts. German courts have developed comprehensive case law in this regard, which is why GTCs must be updated regularly. 

Further differences exist in particular with regard to statutes of limitations and formal requirements (e.g., with regard to the assignment of claims, which in Germany can also be made by conclusive conduct). 

Job descriptions need to be written with care. Failure to do so can quickly lead to unequal treatment, resulting in claims for damages and damage to the company’s image. Minimum wage regulations must be observed when planning the budget. The minimum wage also applies to interns, unless the internship is for training purposes. It is also possible to agree a probationary period of up to six months, during which notice of termination can be given by both parties with a shortened notice period of two weeks. 

Numerous peculiarities apply to the drafting of German employment contracts. For example, fixed-term employment contracts must be signed in handwriting, otherwise they are deemed to remain valid for an indefinite period. When engaging freelancers, the risk of false self-employment is the biggest problem. If freelancers are later classified as employees by the German pension insurance fund, there is a risk of substantial back payments of social security contributions and taxes. Criminal consequences are also possible. In addition, certain professional groups are subject to blanket classifications as employees, which are difficult to disprove. The risk of false self-employment can be significantly reduced by carefully reviewing freelance contracts and the circumstances in which they are actually lived.

Compared to Switzerland, strict termination rules apply in Germany to companies with ten or more local employees. In such companies, any ordinary termination requires a legitimate reason, which can be operational, personal, or behavioral. In the event of a termination for conduct, an official warning must first be issued. Extraordinary termination should be well-considered as well as it also requires a legitimate reason, which needs to be carefully presented in the event of legal proceedings. 

Every notice of termination in Germany must be signed by hand. Termination by e-mail, for example, would be invalid in Germany. In Switzerland, on the other hand, this is perfectly permissible.

For incentivizing employees, employee stock ownership plans (in the form of VSOP or ESOP) are commonplace also in Germany. While participation in the form of an ESOP (i.e., real shares) is still more prevalent in other jurisdictions, in Germany, virtual participation by means of VSOPs has come to prevail. A purely virtual shareholding has several advantages. First, when real shares or share options are granted, taxes and social security contributions are often already due at a point in time when no money has flown yet – for example, at the time of a change of employer. Virtual shares, on the other hand, are only taxable when a liquidity event occurs, and the employee receives cash. Secondly, exercising real share options is more time-consuming and costly because the transfer of  German stocks and shares must be notarized.  

We would be happy to support you in rolling out a German or cross-border employee stock option program.